Mid-term economic strategy report: section by section
Prof John FitzGerald, ESRI research professor, presents the quarterly economic commentary at the ESRI. Photograph: Cyril Byrne/The Irish Times
Economic outlook and scenarios
The Government repeats its budget day projections by forecasting growth of 2 per cent in gross domestic product next year, with a positive contribution from both domestic and external demand.
In its “baseline” economic forecasts, it predicts GDP growth will rise to 2.3 per cent in 2015, 2.8 per cent in 2016 and exceed 3 per cent from 2017.
The unemployment rate will peak at 13.5 per cent this year, it estimates, falling to 12.4 per cent in 2014 and nudging consistently downwards to 8.1 per cent in 2020. In a “high-growth” scenario, this process will be accelerated, with the unemployment rate dropping below 10 per cent a year earlier, in 2017, and ending up at 5.9 per cent – effectively “full employment” – in 2020.
Ensuring debt sustainability
Confidence in the long-term health of public finances is hailed as one of the three pillars of the strategy for a “job-rich recovery”. To get Ireland’s debt-to-GDP ratio on a declining path, the Government argues that “strict overall budgetary constraints, taxation and expenditure policy” will be necessary.
The Government says it is committed to maintaining what it claims is a “strong progressive structure” on income tax, in which those on higher incomes pay proportionately higher rates than those on lower incomes. Tax avoidance will be tackled, it promises, “so as to support fairness”.
This section of the document maps out how the Government plans to loosen constraints on credit, particularly for small and medium-sized businesses, and move from an economy where companies are starved of capital to a point when Ireland will become “a world leader in the provision of a diverse and innovative suite of financial products to SMEs”.
On household debt, it states there is a need for new mortgage products that allow borrowers with negative equity to trade up and trade down and “increase mobility” for those borrowers who do not want to lose their tracker mortgage rates.
Supporting employment and living standards
The Government’s priority in the short to medium term is to grow employment levels “through further improvements in competitiveness”. After that, “the key to increasing living standards is through raising productivity”, it states.
Enterprise support services will become embedded in local authorities as part of the Government’s planned shake-up of local government.
The Department of Social Protection will be charged with amending the tax and welfare systems “to ensure that work always pays and to address work disincentives for atypical workers”.
Sheltered sectors of the economy – legal, medical and certain other professional services – will eventually be opened up to competition and investment, it suggests.
The strategy document is light on detail and the final section, devoted to policy actions, merely gives an indicative timetable for the announcement of new measures. These include the launch of a new public service reform plan and the next Action Plan of Jobs in the first quarter of 2014, and the publication of a white paper on universal health insurance around the same time.
A decision will be taken on pension reforms in “early 2014”, it adds, while a strategy for the future of the International Financial Services Centre and the construction sector will also be finalised at this point.
The second quarter will see a review of tourism policy, the publication of the advisory group’s report on tax and social welfare, and the formation of a new aviation policy, among other developments.